Offshore investment market is growing once again, reassuring all banks and wealth managers serving this lucrative, if challenging segment that the Common Reporting Standard (CRS) and recent scandals have not put it into a terminal decline. However, the shape of post-CRS world is likely to be very different than what it was before: more concentrated, institutionally oriented, and with slower growth.

Growth will slow in the retail non-resident sector as the CRS inclines more investors to book onshore, and obtain their geographic diversification via other means. Amongst the largest international financial centers (IFCs), those with the largest portion of institutional AUM such as Luxembourg, witnessed the strongest growths.

The impact of the CRS upon wealth managers in the largest IFCs is likely to be quite muted, both because they tend to be diversified in terms of their offerings to both institutional and retail investors, and because they are attractive as major financial markets in their own right.

Booking centers with particularly fast growth in 2016 benefited from one-off adjustments, such as the reopening of the economy to international investors (Argentina), or being rediscovered by investors as the local economic cycle turned back towards growth (Canada and Brazil).

Though the proportion of HNW wealth booked offshore has declined compared to the previous years, there remain strong sectors in the Middle East & Africa along with sectors of Asia Pacific.

Branches in regional wealth management hubs remain critical, even as the offshore markets consolidate due to the preference for offshoring wealth only to the near-abroad.

Growth will slow in the retail non-resident sector as the CRS inclines more investors to book onshore and obtain their geographic diversification via other means.

The impact of the CRS upon wealth managers in the largest IFCs is likely to be quite muted, both because they tend to be diversified in terms of their offerings to both institutional and retail investors, and because they are attractive as major financial markets in their own right.

Booking centers with particularly fast growth in 2016 benefited from one-off adjustments such as the reopening of the economy to international investors (Argentina), or being rediscovered by investors as the local economic cycle turned back towards growth (Canada and Brazil).

Though the proportion of HNW wealth booked offshore has declined from previous years, there remain strong sectors in the Middle East & Africa along with sectors of Asia Pacific.

Branches in regional wealth management hubs remain critical, even as the offshore markets consolidate due to the preference for offshoring wealth only to the near-abroad.

Reasons to buy

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2. The Global Offshore Market In Context 8
2.1. The overall offshore investment market was worth $68.5tn in 2016 8
2.1.1. Offshore investment growth is being driven by institutional investors 8
2.1.2. Ireland joins the top 10 offshore markets off the strength of its fund market 11
2.1.3. Broader investment outflows declined in 2016 as Europe turned off the taps 12
2.1.4. Offshore deposits are growing fast once again, as policy rates begin to rise 14
2.1.5. Continuing a long-term trend, offshore mutual funds advanced again in 2016 16
2.1.6. 2016 was particularly weak for offshore holdings of equities 17
2.1.7. Bond holdings increased as offshore investors rediscovered European debt 18
2.2. Offshore centers are typically adjunct to major financial markets but there is a role for specialists 19
2.2.1. The largest offshore centers are major financial markets, not tropical islands 19
2.2.2. Traditional offshore booking centers have fared poorly relative to the rest of the non-resident market 21
2.2.3. The Panama Papers caused a considerable storm and have stalled Panama’s rise as an offshore private wealth hub 23
2.3. The fastest-growing centers include markets being rediscovered by international finance and key Middle East IFCs 25
2.3.1. Offshore investors have rediscovered the charm of some developing markets 25
2.3.2. Qatar and the UAE led the Middle East in attracting offshore investment 26
2.3.3. Switzerland continues to lose AUM, though it is coming to the end of its drought 27
2.4. CRS implementation has altered the calculus of HNW offshoring 29
2.4.1. The offshore wealth management sector now needs to deal with FATCA on steroids 29
2.4.2. 2017 is a watershed year for the offshore industry due to the initial CRS reports among early adopters 30
2.4.3. Booking centers dedicated to offshore wealth management need not lose out under the CRS 30

3. Booking Center Preferences Of HNW Investors 33
3.1. HNW individuals globally hold on average 14.7% of their wealth offshore 33
3.1.1. HNW investors from developing markets hold far more of their portfolios offshore 34
3.2. The varied and liquid financial markets of the US make it the top HNW offshore booking center 35
3.2.1. HNW booking center preferences vary significantly depending on nationality 36
3.2.2. European HNW investors are content to use local booking centers, while millionaires from MEA seek out global destinations 37
3.3. HNW individuals in the Americas make use of a range of booking centers to diversify 40
3.3.1. HNW clients from North America are driven by a desire for diversification and tax efficiency 40
3.4. HNW investors in Asia Pacific are less geographically diversified than in the past 43
3.4.1. HNW investors in Asia Pacific have become increasingly biased towards the US 43
3.4.2. The importance of property in Asian offshore investment has led to the rise of Australia as a booking center 44
3.5. The integrated nature of the European economy means offshored money does not travel far 45
3.5.1. Switzerland is still the European capital of offshore private banking 45
3.6. Middle Eastern & African HNW investors aim to limit their exposure to small domestic investment markets 48

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